Rising credit-loss provisions across Botswana’s banking sector may point to continued caution over borrower risk, with analysts warning that persistent inflation and weak cash flows could put further pressure on debt servicing in the coming months.
Absa’s credit impairment charge increased to P136 million in the first half of 2026, from P67 million a year earlier, representing a 104 percent increase in expected credit losses. Amantle Kgosiemang, Acting Finance Director, Absa Bank Botswana, said the increase reflected changes in portfolio risk profiles, increased lending utilisation and updated forward-looking macroeconomic assumptions.
Management described the increase as proactive and said there is no current specific pocket of stress in its portfolio. Pelotelele Motshidisi, Investment Analyst, Kgori Capital, told the Business Weekly & Review that the increase seems to reflect a conservative approach to credit risk and a cautious view of the economy, among other things.
“By raising provisions now, the bank is allowing for the possibility that economic conditions or borrower performance may worsen unexpectedly. This provides some protection against future credit shocks, even though management has not identified any specific pocket of stress currently,” she said.
The increase was reflected mainly in the Personal and Private Banking and Corporate and Investment Banking portfolios. Personal and Private Banking recorded expected credit losses of P80.6 million, compared with P35.7 million in the corresponding period, while Corporate and Investment Banking recorded P35.7 million, up from P8.4 million. Business Banking recorded P19.6 million, compared with P22.6 million previously.
The increase came against a more difficult operating environment, with inflation rising from 4.1 percent in January 2026 to 10.7 percent in June, while consumption expenditure declined by 1.4 percent year-on-year in the first quarter and gross fixed capital formation contracted by 10.4 percent. Construction and agriculture also continued to contract.
Affected Sectors
Within Business Banking, Absa said the slowdown affected agriculture, mining, wholesale and trade, and construction. Agricultural clients faced higher fuel prices and Foot and Mouth Disease, which increased production and distribution costs and constrained revenue generation. Absa said it supported affected clients through repayment moratoriums and other credit arrangements where appropriate.
Behind Increased Lending Utilisation
But increased lending utilisation, another factor cited by Absa, raises a broader question about the condition of borrowers.
Motshidisi said higher utilisation can mean different things. It may mean that customers are borrowing more to support business activity and other productive needs. On the other hand, it may also mean that some consumers are relying more on credit to manage short-term cash-flow needs.
“It becomes a concern if debt continues to increase while income and cash flow are not improving. So, the reason for the borrowing is important,” she said.
She said it may also indicate that households and businesses are drawing more heavily on overdrafts and other approved facilities to manage short-term cash-flow requirements. Overdrafts are commonly used to support working capital and temporary funding needs, so higher utilisation is not necessarily negative.
“It becomes a concern where customers remain heavily reliant on these facilities for a prolonged period, while their income or cash flow is not improving. Continued high utilisation would leave borrowers with less room to absorb any additional financial pressure,” she said.
Farmers feel the pressure
While agriculture has been previously highlighted as an area of growth, Managing Director Keabetswe Pheko-Moshagane said agriculture remains subdued, with FMD recurrence contributing to pressure and a slowdown of activity in the sector. This is compounded by climate-related risks such as El-Nino.
Patrick Malope, Senior Research Fellow at Botswana University of Agriculture and Natural Resources, told the Business Weekly & Review that the pressure on agricultural borrowers is particularly evident in the livestock sector, where FMD-related movement restrictions have sharply reduced farmers’ ability to generate sales while operating costs continue to accumulate.
“For farmers with outstanding loans, the disruption is translating directly into debt-servicing pressure, with sales in some areas described as almost non-existent despite farmers continuing to incur the costs of running their operations.”
The pressure is also being compounded by higher fuel and other input costs caused by tensions in the Middle East, which he said are squeezing farmers’ cash flows at a time when their ability to generate revenue has been restricted. The impact is also extending beyond farmers to feedlotters, transporters, input suppliers, slaughterhouses and butcheries.
Tuli Block Farmers Association Media Liaison pointed out that farmers are currently struggling to convert biological assets like cattle into cash, with FMD restrictions and rising input costs putting significant pressure on cash flow.
“This can make debt servicing increasingly difficult, particularly on farmers who depend on regular livestock sales to meet their commitments,” she said.
Malope said these pressures will persist given that new cases are being confirmed in new places, meaning that it will take longer to contain the disease, while the pressures from the fuel price hike are also likely to persist.
Pressure on other borrowers
Analysts have also pointed out that economic pressures facing borrowers are likely to persist into next year.
“Our in-house view is that inflation will remain elevated throughout 2026 and stay above the BoB’s upper objective range until at least 2Q27. Although we expect a modest economic recovery, with growth of 2.5 – 3.0 percent in 2026, the high cost of living and doing business will continue to put pressure on household disposable income and business cash flows,” Motshidisi said.
The impact, she said, will not be the same for all borrowers. Those with stable incomes and lower levels of debt should be better positioned, while highly indebted households and businesses with limited cash buffers may find it more difficult to meet their repayments.
Absa’s 104 percent increase in expected credit losses is not, on its own, evidence of widespread borrower distress in the banking sector. Motshidisi noted that the warning would become significant if rising arrears, non-performing loans and impairment charges begin appearing across several banks.
Other Banks’ Provisions
FNBB’s credit impairment charge increased to P191 million for the year ended 30 June 2026, from P73.6 million, an increase of more than 100 percent. The bank said the charge reflected pressure on projected macroeconomic conditions into the following year.
FNBB’s credit loss ratio increased to 0.89 percent from 0.34 percent, while its NPL ratio rose slightly to 3 percent from 2.9 percent. The bank also flagged payment delays and cash-flow pressures in certain sectors as emerging credit risks.
Stanbic’s impairment charges rose more modestly, increasing to P40.7 million from P37 million, while its credit-loss ratio increased to 0.6 percent from 0.5 percent. However, the bank reported that job losses affecting scheme lending had resulted in arrears. It also referred to previous increases in NPLs among businesses affected by weakness in mining and moderation in overall economic activity.
BBS Bank provides a longer-term indication of the pressure on borrowers. Its ECL charges rose to P77.5 million in 2025 from P19.1 million, while its NPL ratio increased from 5.23 percent to 6.28 percent. BBS attributed the deterioration in credit quality to the difficult local economic environment, including pressure on household incomes linked to weakness in diamond mining.
“Generally, banks may consider macroeconomic factors such as inflation, GDP, interest rates, etc and other non-macro factors when assessing expected credit losses or they may consider other variables such as (non-macro). These pressures may continue in the short term, particularly for highly indebted households and businesses with limited cash buffers,” she said.
